Record-High Cuts to S&P 500 EPS Estimates for Q2 for 1st Month of a Quarter

During the month of April, analysts lowered earnings estimates for companies in the S&P 500 for the second quarter. The Q2 bottom-up EPS estimate (which is an aggregation of the median EPS estimates for all the companies in the index) declined by 28.4% (to $26.46 from $36.94) during this period. How significant is a 28.4% decline in the bottom-up EPS estimate during the first month of a quarter? How does this decrease compare to recent quarters?

During the past five years (20 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.4%. During the past 10 years (40 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.5%. During the past 15 years (60 quarters), the average decline in the bottom-up EPS estimate during the first month of a quarter has been 1.9%. Thus, the decline in the bottom-up EPS estimate recorded during the first month of the second quarter was larger than the five-year average, the 10-year average, and the 15-year average.

In fact, this marked the largest decline in the quarterly EPS estimate over the first month of a quarter since FactSet began tracking this data in Q1 2002. The previous record was -20.6%, which occurred in the first month of Q1 2009.

At the sector level, all 11 sectors recorded a decline in their bottom-up EPS estimate during the first month of the quarter, led by the Energy (-471.9%), Consumer Discretionary (-78.8%), and Industrials (-61.9%) sectors. Overall, 10 sectors recorded a larger decrease in their bottom-up EPS estimate relative to their five-year average, 10-year average, and 15-year average. The Real Estate sector does not have five years of historical data available yet.

Sector Quarterly EPS Revisions: First Month of Quarter (Source: FactSet)

In fact, seven of the 11 sectors recorded the largest decline in their quarterly EPS estimate over the first month of a quarter since FactSet began tracking this data in Q1 2002: Energy, Consumer Discretionary, Industrials, Communications Services, Health Care, Consumer Staples, and Real Estate.

As the bottom-up EPS estimate for the index declined during the first month of the quarter, the value of the S&P 500 increased during this same period. From March 31 through April 30, the value of the index increased by 12.7% (to 2912.43 from 2584.59). The second quarter marked the 16^th time in the past 20 quarters in which the bottom-up EPS estimate decreased during the first month of the quarter while the value of the index increased over this same period.